AI-Related Legislation Aims to Prepare California Businesses for Potential Disruption

Newsom’s executive order mobilizes state agencies, labor experts and universities to protect workers and small businesses as AI accelerates economic change

Governor Gavin Newsom, in May, issued an executive order directing California to prepare workers, small businesses and communities for the economic disruption that artificial intelligence will bring to the workforce.

The order mobilizes state agencies, labor experts, economists, universities and industry leaders to develop new policies, gather data and identify early warning signs of workforce disruption – while ensuring workers share in the gains created by AI-driven productivity.

The order directs the state to explore policies including severance standards, employment insurance and transition support for displaced workers, worker ownership models, universal basic capital concepts, expanded workforce training and stronger tracking of hiring and payroll trends to help California respond faster to potential layoffs and economic disruption.

California has dominated AI innovation, with 33 of the top 50 private AI companies in the world based in California, and no state has taken more aggressive action to strengthen the safety, security and consumer privacy of technology and online platforms. This new order adds to California’s comprehensive approach in creating “commonsense guardrails” balanced with opportunities to advance innovation in this growing sector.

This is not the first time AI has made its way into statewide legislation in California. In 2023, Governor Newsom made California the first state to take action on Generative AI policy, announcing an executive order to both responsibly adopt this technology in state government and begin studying its risks.

The new executive order directs state agencies to build a framework for responding to potential workforce disruption and ensuring workers are not left behind as AI adoption accelerates.

The order directs the various state agencies to:

Empower workers and help them share in the gains made from AI adoption:

• Evaluate and support opportunities to expand and enhance worker ownership models to support broad-based capital growth and build wealth from productivity gains among workers, including employee-owned company structures.
• Support small businesses through educational and incentive opportunities on best practices and applications for using emerging technology to support competition and broad-based economic growth, while supporting workforce training and retention.
• Identify ways the collective bargaining process has delivered positive outcomes for workers.
• Add more on-the-job training and AI preparation in higher education.

Track and understand the impact of AI on the workforce, filling the gaps in knowledge and providing clear and concrete data with:

• A new report on recommendations, best practices and early economic warning signals of potential labor disruptions, to be drafted in consultation with labor, industry and academic experts.
• A new dashboard showing the impact of AI across sectors.
• Recommendations within 180 days on revisions and updates to the California Worker Adjustment and Retraining Notification (WARN) Act, to ensure WARN can be used to provide early warning data and is responsive to emerging industry trends.
• New business feedback on the role of technology in workforce decisions to be incorporated into the state’s monthly jobs report.

Respond to possible employment and workforce disruption by:

• Reviewing policies that provide workers with a safety net, including severance and other forms of compensation, such as stock or other forms of equity.
• Increasing awareness and enrollment in employment insurance programs, including employment stability payments.
• Creating an AI playbook to modernize job training programs, including expanding strategies for connecting dislocated workers with training and technical assistance and updating target industries to reflect emerging economic trends.
• Creating a single online platform to enable Californians to more easily navigate government services and, ultimately, help Californians identify all social services for which they may be eligible.
• Leveraging California Volunteers for those experiencing long-term unemployment and to provide essential training for entry-level workers.

Develop stronger public policy and support programs for using AI to advance the public good:

• Work with academic experts and the private sector to develop recommendations for altering incentive structures and increasing the likelihood of AI development and deployments that advance the public good and address critical problems facing society.

If this push is any indication, and as AI continues to evolve and make its way into virtually every industry, it is likely that there will be more legislation on the topic in the near future.